The U.S. Justice Department has joined a whistle-blower's lawsuit against Prime Healthcare Services alleging the hospital chain fraudulently billed Medicare for beneficiaries admitted as inpatients when they should have been treated as outpatients.
The government filed notice in U.S. District Court in Los Angeles on Monday saying it would partly intervene in the case. Whistle-blower cases often have a better chance of succeeding when the government gets involved.
Troy Schell, Prime general counsel, said in a statement late Tuesday that he's confident Prime will be exonerated.
"The allegations under investigation arise from complex regulation and a lack of clarity between what federal regulators and physicians believe necessary to adequately document medical necessity for hospital admission," Schell said. "Similar investigations have involved almost every major health system and hundreds of hospitals across the country."
Prime Healthcare and its not-for-profit arm, Prime Healthcare Foundation, own and operate 43 acute-care hospitals across the country.
In the lawsuit, Karin Berntsen, a registered nurse who has been an executive at Prime's Alvarado Hospital Medical Center in San Diego, alleges Prime hospitals billed Medicare for patients admitted as inpatients when they should have been outpatients placed on “observation” status.
“PHS's behavior is particularly egregious because in an effort to receive greater reimbursement from Medicare and other government healthcare programs, PHS has explicitly instructed its physicians and hospital staff to disregard the Medicare guidelines and to choose inpatient admission over outpatient/observation status in almost every instance, regardless of whether the criteria for inpatient admission has been satisfied,” according to Berntsen's complaint.
According to the Justice Department, its ongoing investigation into the matter has yielded “sufficient evidence” to merit partial involvement.
Multiple witnesses who worked at Prime hospitals told federal investigators that Prime Chairman and CEO Dr. Prem Reddy would criticize emergency department doctors who passed up opportunities to admit Medicare beneficiaries; request more hours for emergency department doctors whose patients had high rates of admissions and fewer hours for those whose patients had low rates of admissions; and tell doctors to find ways to admit all patients over age 65. Witnesses also allege that he told emergency doctors that insured patients who spent more than two hours in the emergency department waiting for test results should be admitted, but that was not necessarily the case for uninsured patients.
The government also conducted its own analyses of Medicare claims data that showed hospital billings for beneficiaries on “observation” status would plummet after Prime acquired a hospital.
In recent years, Prime has been rapidly acquiring hospitals.
“Time after time we've seen Prime Healthcare's shady practices at hospitals across the country, and we're glad the federal government is getting involved to put a stop to the company's conduct,” said Dave Regan, president of Service Employees Union International-United Healthcare Workers West, in a statement. “To manipulate doctors so they admit more people into a hospital is immoral and disgraceful.”
Prime and the SEIU-United Healthcare Workers West have been tangled in labor disputes. In February, the National Labor Relations Board ordered Prime to honor its contract with 1,100 unionized employees at three of its Southern California hospitals.